The Federal Reserve slashed interest rates by a half percentage point on Wednesday, a decisive policy pivot after aggressively fighting inflation for more than two years. The decision to deliver an outsized rate cut, as well as a new forecast for 50 basis points in cuts during the final two meetings of the year, signal that officials view risks to the labor market as a growing concern. With inflation moving closer to its 2% target and overall growth holding strong, the Fed's goal was to loosen monetary policy while the US economy is still on solid footing. "We don't think we're behind. You can take this as a sign of our commitment not to get behind," Chair Jay Powell said in a press conference.

The rate cut marks the start of a new easing cycle for the Fed, which hiked the fed funds rate 11 times in 2022 and 2023 amid a rapid rise in inflation. The economy defied predictions that a two-decade high in borrowing costs would induce a significant downturn, and expectations that the Fed can successfully orchestrate an elusive soft landing have grown. Still, while officials are encouraged by inflation's progress, Powell said: "We're not saying 'mission accomplished.'" Across the Atlantic, the Bank of England held rates steady on Thursday after lowering them in August, but it indicated that another cut could come as early as November as it gradually reduces rates. After the Fed joined its global peers in formally entering a rate-cut cycle, experts from PGIM's affiliates discuss the implications across asset classes.